Loyalty points giant reports strong earnings and brings Southwest onboard

A provider of e-commerce solutions to airlines and hotels, Points International released its fourth quarter results March 6, indicating the company is in growth mode.

For the fourth quarter, Points International, which operates the Points.com consumer site, saw its net income increase 166% to $5.6 million, compared to the year-ago period. That increase was largely tax-related, however.

The company's revenue rose 24% to $40.8 million, and the increase was driven by new partnerships and increased marketing.

Toronto-based Points International, the largest company enabling the sale and transfer of miles and points online, is implementing a Finnair partnership by the end of this month, and Southwest Airlines is slated to go live in the middle of 2013.

Points International forecasts that eight partnership deals penned since the beginning of 2012, including those in the travel industry with Southwest, Wyndham, Melia Hotels, Aeromexico, and Finnair, will contribute $100 million in annual revenue.

CEO Rob MacLean, speaking during the company's earnings call, said the company's marketing and integration teams are meeting regularly with counterparts at Southwest, and that the partnership is on track for implementation "mid-year." Southwest Rapid Rewards members would be able to sell and transfer their points once the partnership becomes reality.

Meanwhile, Points International is undoubtedly watching developments in the US Airways-American Airlines merger, although MacLean said Points International likely wouldn't feel any impact until 2014.

Points International has a deeper relationship with US Airways than with American Airlines.

With US Airways, Points International buys miles from the airline at wholesale rates and then resells them to consumers. For American Airlines, Points International merely acts as an agent for American, and retails its miles to travelers at lower margins.

Obviously it would benefit Points International if the new American Airlines decides to adopt US Airways' wholesale relationship with Points International, and it would hurt if American's agency relationship with Points International becomes the future model.

MacLean said Points International is engaged in conversations with both airlines, adding that there are "tremendous opportunities" to expand the relationship.

In other matters, MacLean said Points International mounted promotions for two U.S. carriers with "fairly significant" price increases in the fourth quarter, and the promotions didn't meet expectations, and impacted revenue.

On the consumer front, Points International is making a push to make all of its products more "mobile-friendly," MacLean said, adding that transaction rates on tablets are still well-below those consummated on desktops.